Farm bill conference committee update, November 2013

Source: University of Illinois | Nov 15, 2013

The House and Senate are beginning to conference the farm bill. There are some significant differences between the two versions, including: nutrition programs, Title 1 programs, crop insurance and replacement of permanent legislation.

Regarding Title 1 programs, the House proposes a choice option on multiple-year assistance (similar to the 2008 Farm Bill), specifically a one-time choice between a revenue program and a reference price (new name for target price) program. The House adds SCO to this choice mix by allowing SCO only for farms that choose the reference price program. The reference prices are fixed, and payment is made on current planted acres.

In contrast, the Senate proposes a return to a single Title 1 program structure for all covered crops. To simplify its description, a multiple-year revenue program, which provides assistance for smaller declines in revenue, sits atop a reference price program. Assistance is scaled up as the decline in revenue and price increases since a greater share of acres is eligible for reference price payments than for revenue program payments. The reference prices for rice and peanuts are fixed while the reference prices for all other crops and the revenue program guarantees for all crops are set by a moving average formula that declines or increases with changes in market prices over time. Reference price payments are made on historical base acres.

As for crop insurance, the two differences are likely to be divisive. The first and probably the most divisive is that the Senate, but not the House, requires a farm to comply with its conservation plan to qualify for the insurance subsidy. A compounding perspective is that imposing conservation compliance for the insurance subsidy may be seen as a way to offset, at least in part, the impact of relatively large cuts in conservation program spending. The second potentially divisive issue is that the Senate, but not the House, reduces a farm's insurance subsidy level by 15 percentage points if its aggregate gross income (AGI) exceeds $750,000.

Replacement of the permanent legislation is something the House is pushing for. For over 50 years, Congress has written Title 1 farm programs as sunset (i.e. limited-life) amendments to the so-called permanent farm bills of 1938 and 1949. The Senate continues this tradition. For example, its Title 1 programs for field crops expire after the 2018 crop year. In contrast, the House replaces permanent laws with its Title 1 and provides no sunset. The House proposal reduces the need to pass farm bills in the future and leaves every other program in the bill in doubt because they sunset after five years.